The Great Debate UK

from Anatole Kaletsky:

If Europe wants Thatcherism, it must abandon austerity

Among all the obituaries and encomiums about Margaret Thatcher, very few have drawn the lesson from her legacy that is most relevant for the world today. Lady Thatcher is remembered as the quintessential conviction politician. But judged by her actions rather than her rhetoric, she was actually much more compromising and pragmatic than the politicians who now dominate Europe. And it was Thatcher’s tactical flexibility, as much as her deep convictions, that accounted for her successes in the economic field.

Governments in Europe and Britain today are obsessed with hitting preordained and unconditional targets: Inflation must be kept below 2 percent; deficits must be reduced to 3 percent of gross domestic product; government debt must be set on a declining path; banks must be recapitalized to arbitrary ratios laid down by some committee in Basel. In sacrificing their citizens’ well-being and their own political careers to these numerical totems, modern leaders often claim inspiration from Thatcher. And when voters turn against them, Europe’s leaders keep repeating Thatcher’s most famous slogans, “There is no alternative” and “No U-turn”.  But are these the right lessons to draw from Thatcher’s political life? A closer look at her economic achievements suggests otherwise.

In the 20 years she spent in parliament before becoming prime minister, Thatcher first saw Harold Wilson’s Labour government wrecked by currency crises and trade union militancy; then Ted Heath ousted by a miners’ strike; and finally James Callaghan humiliated by the 1976 sterling crisis and driven out of office by the wave of public-sector strikes that came to be called the “winter of discontent.” After these searing experiences, her immediate priority on becoming prime minister was to turn British monetary management and labor relations upside down. Yet her actions were much more cautious and pragmatic than her rhetoric.

In fact, the Thatcher revolution started with a huge tactical surrender: Within two months of taking office, she gave the public-sector unions that had brought the country to a standstill pay raises averaging 21 percent. This huge award resulted in the biggest increase in inflation in British history – from 10 percent when Thatcher took over to 22 percent a year later (as measured by the retail price index). Controlling this inflationary upsurge required stratospheric interest rates and an overvalued currency. These, in turn, led to a trebling of unemployment and the collapse of many British manufacturing businesses. In response to this economic disaster, Thatcher quickly abandoned the monetary targets she had initially claimed as the lodestar of her economic policies. While Thatcher’s recession seemed to go on forever to Britons who lived through it in the early 1980s, her U-turn against austerity came dizzyingly fast by the standards of today’s obstinate politicians, especially those in Europe.

from Breakingviews:

Boris Johnson intervention reduces Brexit chances

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By Hugo Dixon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Boris Johnson's intervention in the European debate reduces the chance of a British exit from the European Union - or Brexit. The Mayor of London, a popular Conservative politician, says he will campaign to keep Britain in the EU provided it can negotiate a pared-down relationship based on the single market.

A two-speed economy for Europe’s youth

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By Kathleen Brooks. The opinions expressed are her own.

A new dimension to the currency crisis is upon us. First there was the two-speed growth – with richer, predominantly Northern European economies performing well while the weak south was on the cusp of recession. But in recent months an even more worrying divide has started to emerge in youth unemployment.

In Spain the number of under 24-year-olds out of work is 50 percent, in Italy nearly a third of young people are without a job and in France the figure is a quarter.

from John Lloyd:

No Union, please, we’re English

The opinions expressed are his own.

In France, it is les Anglais. In Germany, die Engländer. In Italy, gli Inglesi. In Russia, Anglichane.

The peoples of the United Kingdom, for most other peoples, are habitually “English.”

Cohesive Europe

By Konrad Niklewicz, Spokesman for the Polish Presidency of the EU. The opinions expressed are on behalf of the organisation he represents.

How should the EU distribute €370 billion? The new cohesion policy rules proposed by the European Commission provide a good basis for further debate, but some of their components are clearly questionable.

Capitalism and democracy under threat from euro zone crisis

By Laurence Copeland. The author is a professor of finance at Cardiff University Business School. The opinions expressed are his own.

It takes quite a lot to make me feel sorry for politicians, especially the European variety, but I must say that Nicholas Sarkozy and particularly Angela Merkel have a right to be livid at the news that the Greek government now proposes to hold a referendum on whether they will agree to be given another gigantic dollop of aid. Having only reached agreement (of a very vague kind) at last week’s summit in the early hours of the morning, you can imagine how the French and German leaders must have felt when they discovered that their marathon negotiating sessions may all have been in vain. It seems the Greeks are now too wary of foreigners bearing gifts to accept their largesse without weeks or months of prior deliberation and debate.

from Breakingviews:

Euro-recession, not rebellion, is what boxes UK in

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By Ian Campbell. The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

An E.U. protest vote by members of his own party has knocked the UK prime minister. For the moment, the Conservative party rebellion is largely symbolic.

The euro zone marriage is over

By Laurence Copeland. The opinions expressed are his own.

Under the Arc de Triomphe, tourists can gaze up at the engraved list of Napoleon’s great victories: Austerlitz, Jena, Wagram… Perhaps a similar triumphal arch should be built in Brussels to commemorate the string of victories won by a tiny band of heroic Eurocrats over the mass of their combined electorates: Rome, Maastricht, Lisbon, Wroclaw, and now Berlin, where, to nobody’s surprise, the integrationists in the Bundestag have easily seen off the opposition to their plan to bolster the EFSF. Cue the now-familiar backslapping in Europe after each of their knife-edge victories over the forces of democracy.

The starting point for these Eurocrats/integrationists is that the popular will is simply an obstacle on the road to the ultimate destination of a United States of Europe. Whenever they encounter one of these inconvenient roadblocks, they fume, argue among themselves about the merits of alternative routes until they finally swerve triumphantly round the obstacle, congratulating each other for their ingenuity and skill.

Another week, another E.U. bailout agreement

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By Mark Hillary. The opinions expressed are his own.

Once again German Chancellor Angela Merkel has had to dig deep to ensure that the euro zone can limp along for a little longer without any single nation defaulting.

And this story changes day by day. No sooner has Germany rescued the euro, Greece apologises and says they can’t meet the deficit targets – no more savings can possibly be achieved through austerity.

Ben Bernanke could teach the EU a thing or two

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By Kathleen Brooks. The opinions expressed are her own.

Markets thrive on certainty. Anything that smacks of uncertainty, fence-sitting or indecision will lead to market turbulence, as investors punish those who don’t tell them how it is.

This is exactly what we are seeing in Europe right now. The markets are losing patience with the EU’s inability to come up with a credible plan to fight the sovereign debt crisis and that is why it is escalating at an alarming rate.

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